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HOUSING AND COMMUNITY SERVICES DEPARTMENT

DIVISION 20

SINGLE-FAMILY MORTGAGE PROGRAM

813-020-0005

Purpose and Objectives

The rules of OAR chapter 813,
division 20 establish and implement the Single-Family Mortgage Program. Under the
program, the Department purchases loans issued by lenders for acquisition of single
family homes in order to encourage and assist moderate- and lower-income persons
in Oregon to purchase, improve and rehabilitate owner-occupied new and existing
residential housing.

(1) A bank, savings bank or
other financial institution that is authorized under the laws of a state or of the
United States to engage in the business of making secured loans for residential
housing may apply to become a lender under the Single Family Mortgage Program. An
applicant shall submit to the Department:

(a) An application in the form
prescribed by the Department;

(b) An opinion by the counsel
of the applicant regarding the power and authority of the applicant to enter into
a loan purchase agreement with the Department;

(c) A list of the authorized
officers of the applicant and the signature of each officer;

(d) The most recent audited
financial statements of the applicant;

(e) Documentation evidencing
the applicant's bond and insurance coverage; and

(f) An application charge in
an amount established by the Department for its costs of evaluation and administration.

(2) An applicant may qualify
as a lender under the program if the Department determines that the applicant:

(a) Makes loans for single family
residences in the regular, usual and normal course of its business;

(b) Has the capability and resources
to originate loans under the program in a sound and professional manner; and

(c) Has or will have a valid and binding
contract with a loan servicer approved by the Department under OAR 813-020-0050.

(3) A determination by the Department
under section (2) of this rule is subject to the Department’s consideration
of factors that include but are not limited to the following:

(a) The number and experience
of employees available to originate program loans;

(b) The applicant's financial
capability to originate program loans;

(c) The applicant's qualification
as a seller or servicer for the Federal National Mortgage Association, the Federal
Home Loan Mortgage Corporation or the Federal Housing Administration, or as a "Special
Lender" under the federal Servicemen's Readjustment Act;

(d) Whether the applicant's
deposits are insured by the Federal Deposit Insurance Corporation; and

(e) The applicant's reputation,
experience and performance in the area of residential lending and any other area
of the applicant' business.

(4) Before a lender that is
qualified by the Department under section (2) of this rule may make a program loan,
the lender shall enter into an agreement with the Department providing for the manner
and terms of sale of program loans, according to a standard form prescribed by the
Department.

(1) A lender approved by the
Department under OAR 813-020-0020 may apply to the Department for a reservation
of Department funds with which the Department may purchase a loan made by the lender
under the Single Family Mortgage Program. A lender applies for a reservation by
submitting to the Department the name of the applicant for the loan, the address
of the property to which the loan applies, the amount of the loan, the acquisition
cost and any other information and documents requested by the Department.

(2) Program loan funds are reserved
on a first-come first-served loan by loan basis, except that the Department may
also move to the list of approved loan reservations a reservation from a list of
standby reservations established by the Department whenever a reservation approved
by the Department is cancelled by a lender.

(3) A lender may assign a reservation
approved by the Department to another lender approved by the Department if both
lenders consent to the assignment in writing and if the Department authorizes the
assignment.

(4) A lender shall report and
confirm to the Department for each reservation, on a regular basis established by
the Department, all of the following information:

(a) The name of the borrower;

(b) The address of the property
to which the loan applies;

(c) The loan amount; and

(d) The date on which the loan
was cancelled or the dates on which the loan was approved and closed.

[Publications: Publications
referenced are available from the agency.]

(1) A person is eligible to
receive a loan under the Single Family Mortgage Program if, on the dates of application
and loan closing:

(a) The total of the annualized
gross household income, from any source and before taxes and withholding, of all
non-minor persons who will reside in the single family residence to which the loan
applies does not exceed the applicable income limit established by the Department
and by the Internal Revenue Code of 1986, as amended;

(b) The person:

(A) Is a resident or intends
to be a resident of Oregon;

(B) In good faith intends to
occupy the single-family residence as a permanent principal residence;

(C) Possesses the legal capacity
to incur the obligations of the program loan;

(D) Has a credit standing acceptable
to the Department;

(E) Agrees that any other residential
property owned by the person will be sold by the time of closing; and

(F) Meets applicable requirements
established by Section 143 of the Internal Revenue Code of 1986, as amended and
as described in OAR 813-020-0070, if the program loan is to be made from the proceeds
of bonds sold after September 15, 1982.

(2) A loan under the program
is also subject to the following provisions:

(a) The application for the
loan must be processed according to the rules of this division;

(b) The acquisition cost may
not exceed the limit established by the Department and in effect when the loan application
is made; and

(c) An applicant for a loan
may not have held a present ownership interest in a principal residence at any time
within the three years immediately preceding the date of the loan application unless
the residence is located within a targeted area as designated under OAR 813-020-0070.

(3) Subject to OAR 813-020-0045
regarding a lender’s refusal of a program loan, a lender shall determine the
applicant's qualifications to be a borrower under the program.

(4) If a program loan is insured
by the Federal Housing Administration or a Qualified Mortgage Insurer or guaranteed
by the Veterans' Administration or USDA Rural Development, the Department authorizes
the lender to accept approval by such a federal agency or a qualified mortgage insurer
as satisfactory evidence of the creditworthiness of the applicant. In all other
instances, a lender must determine the acceptability of the applicant's credit standing
after thoroughly evaluating the applicant's credit, taking into account such factors
as:

(a) The ratio between the applicant's
stable monthly income and estimated housing expenses, including repayment of the
program loan and any secondary housing debt financing;

(b) The ratio between the applicant's
stable monthly income and the estimated monthly payments on all indebtedness of
the applicant, including the program loan;

(c) The applicant's ability
to accumulate wealth, including funds needed for down payment and closing costs
on the program loan;

(d) The history of the applicant's
previous ability to meet debt service requirements; and

(e) Any other factors commonly
considered by prudent institutional mortgage investors, such as prior bankruptcy
of the applicant, history of slow payments on previous obligations, job tenure,
frequent changes of residence and the existence of lawsuits, judgments or foreclosures
involving the applicant.

[Publications: Publications
referenced are available from the agency.]

(1) A loan under the Single-Family
Mortgage Program is eligible for purchase by the Department:

(a) If the borrower holds title
to the single-family residence in fee simple or in another form of ownership acceptable
to the Department; and

(b) If the loan:

(A) Meets to the satisfaction
of the Department the requirements in the purchase agreement between the Department
and the lender;

(B) Has a final maturity at
least fifteen and not more than forty years from the date of its making;

(C) Is secured by a first lien
deed of trust granted by the borrower on the single-family residence financed by
the loan; and

(D) Is made solely to finance
the purchase, construction or purchase and rehabilitation of an existing or newly
constructed single-family residence for use as the permanent, principal residence
of the borrower.

(2) A loan may not be made under
the program to refinance an existing loan unless the existing loan is a temporary
loan with a loan term of 24 months or less for constructing or rehabilitating a
single-family residence. The temporary loan also must have been made on or after
the commencement date of the commitment term during which the program loan is sold
to the Department. If a program loan is made to refinance such a loan, the lender
shall certify to the Department that construction or rehabilitation has been satisfactorily
completed before the delivery of the program loan for purchase.

(3) A lender may execute a program
loan with a borrower only on forms approved by the Department and in a manner satisfactory
to the Department. The forms must prescribe program loan requirements regarding
insurance, escrow payments, late charges, deficiencies, defaults, priority of liens
and similar matters.

(4) The Department may purchase
a program loan with a graduated or other payment schedule based on criteria established
by the Department.

(5) A program loan is subject
to prepayment at the Department's option if at any time the borrower does not reside
in the residence financed by the program loan but remains the owner of the residence,
or if the lender or Department determines that the borrower was ineligible at the
time the loan was made.

(6) To establish the interest
rate for a program loan, the Department shall consider the rates of interest on
the bonds, prevailing rates for similar loans and the ability of borrowers under
the program to afford such rates.

(7) The original principal amount
of a program loan and any secondary financing may not exceed 97 percent of property
value unless the program loan is insured by the Federal Housing Administration or
a qualified mortgage insurer, or guaranteed by the Veterans' Administration or USDA
Rural Development. Property value must be calculated on the lesser of the purchase
price of the property or its appraised value.

(1) A residence is eligible
for a loan from the Single-Family Mortgage Program if:

(a) The residence is located
in Oregon;

(b) The residence is structurally
sound and functionally adequate;

(c) The residence is only one
single-family residential unit;

(d) The residence conforms with
all applicable zoning requirements, building codes and similar requirements; and

(e) The acquisition cost, including
any deferred, indirect or nonmonetary consideration other than labor of the borrower
and the borrower’s family, and the appraised value of the residence do not
exceed limits established by the Department under this rule.

(2) In addition to the requirements
of section (1) of this rule:

(a) If the loan on a residence
includes proceeds of bonds sold after September 15, 1982, a residence is eligible
for a program loan only if no more than 15 percent of the total living area of the
residence is of a character that is subject to being rented for or used in the operation
of a trade or business conducted on any part of the land or improvements, thereby
qualifying the use as a deduction for federal income tax purposes under Section
280A of the Internal Revenue Code.

(b) If a residence to which
this rule applies is a part of a condominium or planned unit development, the eligibility
of the residence for a program loan is subject to a determination by the Department
whether granting the loan would result in an excessive percentage of units in the
condominium or development that are financed by program loans.

(3) For the purpose of this
rule, a determination by the Department of limits on:

(a) The acquisition cost of
a residence is subject to consideration of the following factors:

(A) The cost and condition of
housing within the state;

(B) Income levels established
for the program;

(C) Purchase price limits under
applicable federal law; and

(D) Reasonable down payment
requirements.

(b) The appraised value of a
residence is subject to limits established by the Department and to consideration
of the following factors:

(1) A lender shall proceed in
good faith to process a loan application under the Single Family Mortgage Program
and shall make the program loan if the lender determines that:

(a) Loan funds are available;

(b) The application is complete;

(c) The application appears
to comply with the rules of this division and the terms of the applicable loan agreement;
and

(d) The applicant appears to
be a borrower who is eligible for a loan under OAR 813-020-0030.

(2) A person who is refused
a program loan by a lender may demand of the lender, in writing, a written explanation
of the specific reasons for the refusal. The lender
shall comply with the demand not later than the 30th day after the date on which
the lender receives the demand.

If the amount of a loan under
the Single-Family Mortgage Program is greater than 80 percent of the original acquisition
cost or, if lower, its value according to an appraisal acceptable to the Department,
the borrower shall obtain and maintain in force mortgage insurance or a guarantee
of the program loan by a qualified mortgage insurer. The following requirements
apply to the mortgage insurance policy or guarantee:

(1) The policy must be in effect
at the time of sale of the Program Loan to the Department;

(2) The Department must be named
as the mortgagee insured or guaranteed; and

(3) The amount, terms and extent
of coverage of the insurance or guaranty must meet the requirements of the indenture
of trust and the bond indenture declaration governing the bonds used for the acquisition
of the residence as determined by the Department to provide reasonable security
against loss in the event of default.

A loan under the Single-Family
Mortgage Program must be covered by a title insurance policy issued in American
Land Title Association (ALTA) form by a title insurance company authorized to transact
insurance in Oregon by the Department of Consumer and Business Services. All of
the following requirements apply to a title insurance policy under this rule:

(1) The amount of coverage of
the policy must be at least equal to the outstanding principal balance of the program
loan.

(2) The benefits of the policy
must run to the Department, as either named insured or assignee.

(3) The policy may not be subject
to any exceptions or conditions other than those previously approved by:

(a) The Department;

(b) The federal Department insuring
or guaranteeing the loan, if any; or

A borrower under the Single-Family
Mortgage Program must carry hazard insurance on the residence financed by the program
loan that meets the requirements of the loan agreement. The hazard insurance must
be in effect at the time the program loan is made, and must remain in effect for
the term of the program loan.

(1) A borrower under the Single-Family
Mortgage Program shall continuously occupy the single-family residence financed
by the program loan as the borrower’s permanent and principal residence during
the time the borrower has the program loan, except under the conditions specified
in section (2) of this rule. Prior to repayment of the program loan or prior to
assumption of the loan when the Department allows assumption, the borrower may not
sell, transfer or otherwise dispose of the single-family residence and may not be
a party to any formal or informal arrangement to sell, transfer or otherwise dispose
of the residence.

(2) A borrower under the program
may not vacate, rent or agree to rent the single-family residence during the term
of the program loan unless the borrower requests and receives permission from the
loan servicer and, if the servicer requires, from the Department. Permission must
be based upon the determination of the servicer, and of the Department when the
Department’s permission is requested, that one of the following conditions
applies:

(a) The borrower is making a
good faith effort to sell the residence or refinance the program loan; or

(b) The circumstances causing
the borrower to move out of the residence are beyond the borrower's control, including
but not limited to any of the following or substantially similar circumstances:

(A) The borrower or the borrower's
spouse is drafted into military service;

(B) The borrower or the borrower's
spouse is involuntarily transferred by an employer on a temporary basis;

(C) The borrower or the borrower's
spouse becomes disabled and needs medical rehabilitation, and consequently cannot
live in the residence; or

(D) The borrower or the borrower's
spouse must move to finish an educational degree requirement and has taken a temporary
leave of absence from employment.

(3) For a determination whether
a circumstance under section (2) of this rule applies, the loan servicer or the
Department may require evidence from the borrower of continuing sales or refinancing
efforts or of the specific circumstances asserted.

(4) A borrower shall submit
a request under section (2) of this rule in writing to the loan servicer, and to
the Department if the loan servicer requires the Department’s permission,
one month before the borrower vacates or rents the residence. The borrower may request
permission to rent or vacate the residence for a period of time not to exceed one
year, and may request additional one-year extensions. Permission to rent or vacate
or to extend is subject to a determination by the loan servicer, and by the Department
if the Department also granted permission, that the condition under section (2)
of this rule as asserted by the borrower continues to apply. A borrower must submit
a request for extension to the servicer, and to the Department when applicable,
before the approved period ends.

(5) If a program loan was made
from the proceeds of bonds sold after September 15, 1982, the principal residence
requirements of Section 143 of the Internal Revenue Code of 1986, as amended, apply
instead of the principal residence requirement under this rule. A borrower must
submit evidence satisfactory to the Department that the borrower will comply with
federal residence requirements.

(6) A borrower who does not
comply with a provision of this rule is subject at any time and without notice to
acceleration of all payments due under the program loan and to any other remedy
or civil penalty allowable by law.

Change
of Ownership; Assumptions by Substitution of Liability for a Program Loan

(1) A borrower under the Single-Family
Mortgage program may transfer ownership of property financed by a program loan pursuant
to an assumption if the Department determines prior to the transfer that the assumption
results in a substitution of liability and the purchaser is eligible to be a borrower
under OAR 813-020-0030. The assumption may be made subject to the terms of the existing
loan without an interest rate increase. An assumption under this section is also
subject to the following provisions:

(a) The application for the
assumption must be processed according to the rules of this division, and applicable
terms of the agreement between the loan servicer and the Department;

(b) The acquisition cost may
not exceed the limit established by the Department and in effect at the time the
assumption application is made if the original program loan was made from the proceeds
of bonds sold after September 15, 1982;

(c) An applicant for an assumption
may not have held a present ownership interest in a principal residence at any time
within the three years immediately preceding the date of the assumption unless:

(A) The original program loan
was made from the proceeds of bonds sold on or before September 15, 1982; or

(B) The residence is located
within a targeted area as designated under OAR 813-020-0070; and

(d) The borrower must have an
annualized gross household income that does not exceed certain limits established
by the Department in accordance with the Internal Revenue Code of 1986, as amended.

(2) An assumption under this
rule is not subject to a minimum down payment requirement if no secondary financing
is involved in the transaction. If any part of a down payment is to be provided
by secondary financing, the purchaser shall make at least a five percent down payment
from liquid assets or cash equity, calculated on the current purchase price of the
residence to which the assumption applies. Secondary financing under this section
must amortize over a specified period and may not provide for a balloon payment.

(3) A loan servicer may collect
fees on an assumption under this rule as follows:

(a) The servicer may collect
a nonrefundable assumption application fee. The fee, including the credit report
fee, may not exceed $150. If the assumption is denied, the loan servicer may retain
the portion of the fee not applied to the costs of the credit report. If the assumption
is approved, the loan servicer shall apply the portion not applied to the costs
of the credit report as a credit to the processing fee allowed under subsection
(b) of this section.

(b) The servicer may charge
a fee for processing an assumption. The fee on a conventional loan may be one percent
of the loan balance or $400, whichever is greater, but may not exceed the customary
fees charged in the geographic area for assumptions on mortgage loans owned by private
lenders. The processing fee on a loan insured by the Federal Housing Administration
(FHA) may not exceed the usual and customary fees allowed. A fee charged under this
subsection must be commensurate with the work on the loan by the servicer.

(4) A loan servicer for an assumption
under this rule shall make any necessary disclosures, ensure that all insurance
policies reflect the new ownership and take any action necessary to continue the
benefits of the mortgage insurance or guaranty without interruption.

(5) An assumption transaction
must retain the Department's original loan number.

(1) A bank, savings bank or
other financial institution that is authorized under the laws of a state or of the
United States to engage in the business of servicing loans for residential housing
may apply to become a loan servicer under the Single-Family Mortgage Program by
submitting the following to the Department:

(a) An application in the form
prescribed by the Department;

(b) An opinion by the counsel
of the applicant regarding the power and authority of the applicant to enter into
a loan servicing agreement with the Department;

(c) A list of the authorized
officers of the applicant and the signature of each officer;

(d) The most recent audited
financial statements of the applicant;

(e) Documentation evidencing
bond and insurance coverage;

(f) An application charge in
an amount established by the Department for its costs of evaluation and administration;
and

(g) Documentation indicating
the volume of residential loans produced by the applicant's mortgage lending offices
in Oregon.

(2) An applicant under section
(1) of this rule must demonstrate to the Department’s satisfaction that:

(a) One of the applicant’s
principal functions is servicing loans secured by residential real estate;

(b) Such servicing is a customary
and regular business activity of the applicant;

(c) The applicant is qualified
to engage in servicing mortgage loans for the Federal National Mortgage Association
or the Federal Home Loan Mortgage Corporation and is, if required, a mortgagee approved
by the Federal Housing Administration or Veterans' Administration;

(d) The applicant deposits funds
to accounts in depositories that comply with the requirements of ORS 295.002, 295.005,
295.015 to 295.018 and 295.205 and that are insured to the full extent legally possible
by the Federal Deposit Insurance Corporation or other similar federal insuring Department;
and

(e) The applicant will maintain
servicing facilities adequately staffed with trained personnel familiar with all
rules, regulations and requirements pertaining to or affecting program loans.

(3) An applicant may service
program loans if the Department determines that an applicant is qualified to service
program loans and if the applicant enters into an agreement with the Department
to service program loans according to a standard form prescribed by the Department.

(4) A program loan servicer
may assign program loan servicing to another servicer upon written approval by the
Department.

(1) A program loan servicer
shall service a loan under the Single-Family Mortgage Program in accordance with
the servicing agreement and the rules of this division.

(2) A program loan servicer
shall charge for loan servicing according to uniform servicing rates established
by the Department that are based on the estimated
costs of servicing program loans and prevailing rates for similar services.

(3) For the term of a program loan, the
borrower shall make monthly escrow payments for real estate property taxes and assessments,
hazard insurance premiums and, if necessary, mortgage insurance premiums, except
as otherwise provided in the terms of the loan agreement. A program loan servicer
may pay interest on program loan escrow reserve accounts at its option.

(4) Upon approval by the Department,
a program loan servicer may take one or more actions to protect the Department’s
security in a residence financed by a program loan. The actions may include but
are not limited to the following:

(a) Loan modification;

(b) Property maintenance and
repair;

(c) Foreclosure or deed-in-lieu
of foreclosure proceedings; and

(d) Representation of the Department's
interest in bankruptcy proceedings.

(5) If a program loan servicer
fails to comply with the Department's servicing, reporting or remittance requirements,
the Department may assess a penalty or may terminate the servicing agreement.

The Single-Family Mortgage Program
is meant to and does benefit an economically disadvantaged class of persons. As
such, the Department establishes the program as a "special purpose credit program"
to satisfy the requirements of Interpretation Section 202.8(a)(1) of Regulation
B of the Federal Equal Credit Opportunity Act. (U.S.C. 15, Chapter 41, Subchapter
4, Paragraph 6091.)

(1) Section 143 of the Internal
Revenue Code of 1986, as amended, requires the Department to meet the following
requirements for each loan made under the Single-Family Mortgage Program in order
to preserve the federal tax exemption for bonds issued to finance program loans:

(a) The residence financed by
a program loan must be used as a qualifying principal residence by the borrower;

(b) A person who has held a
present ownership interest in a principal residence at any time within the three
years preceding the date of a loan closing may not obtain a program loan except
as authorized in sections (2) and (3) of this rule;

(c) The acquisition cost of
a residence financed by a program loan may not exceed the limits established by
the Department pursuant to the Internal Revenue Code of 1986, as amended for new
and existing Single-Family Residences;

(d) Only a new mortgage may
be financed, except as provided in OAR 813-020-0025(2); and

(e) A borrower must have an
annualized gross household income that does not exceed limits established by the
Department in accordance with the Internal Revenue Code of 1986, as amended; and

(f) The assumption of a program
loan is prohibited unless each person assuming the loan meets the requirements of
this section.

(2) A lender may approve a program
loan to a person who has held a present ownership interest in a principal residence
at any time within the preceding three years subject to a determination by the Department
that takes into account the federal restrictions on the aggregate dollar volume
of such loans for a specific commitment and the circumstances of the prior ownership.
The Department may give preference to applicants who have lost prior ownership interests
involuntarily, as through divorce settlements, eminent domain proceedings or similar
circumstances.

(3) In certain Targeted Areas,
a higher maximum Acquisition Cost may be applicable and the limitation with respect
to prior home ownership does not apply. Certain census tract areas are designated
as Targeted Areas by Section 143 of the Internal Revenue Code of 1986, as amended.
The Department may apply for approval of additional or revised Targeted Areas after
considering certain statutory variables. In designating such areas, the Department
shall solicit requests from all cities within the state, and apply certain criteria
specified by the United States Department of Housing and Urban Development for such
purpose to other urban and non-urban areas. The Department shall submit its findings
for approval by the Secretary of the United States Department of Housing and Urban
Development and the Secretary of the United States Treasury. The Department shall
retain a current list of designated Targeted Areas.

(4) The Department is required
to establish procedures that ensure compliance with applicable requirements of Section
143 of the Internal Revenue Code of 1986, as amended. Any failure to meet these
requirements shall be corrected within a reasonable time. The Department shall grant
no exceptions or waivers unless allowed by federal law.

(5)(a) When authorized by federal
law, the Department may elect to credit certain amounts that may become available
to its eligible borrowers, rather than to the United States Treasury. The Department
shall periodically determine the overall amounts subject to credit. The Department
shall distribute any credits in compliance with federal law, taking into consideration
such factors as the security of its bonds, the ability of borrowers to repay program
loans, fluctuations in market interest rates and other factors that may affect the
Department’s ability to achieve its purpose and objectives.

(b) When required by federal
law, the Department shall calculate and rebate certain amounts, if any, to the United
States Treasury.

The official copy of an Oregon Administrative Rule is
contained in the Administrative Order filed at the Archives Division,
800 Summer St. NE, Salem, Oregon 97310. Any discrepancies with the
published version are satisfied in favor of the Administrative Order.
The Oregon Administrative Rules and the Oregon Bulletin are
copyrighted by the Oregon Secretary of State. Terms
and Conditions of Use